Airport congestion pricing when airlines price discriminate

A.I. Czerny, A. Zhang

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper extends the literature on airport congestion pricing by allowing carriers to price-discriminate between the business and leisure passengers when operating costs are the same for all passengers. The main results are: First, the second-best discriminating business fare exceeds the first-best uniform fare (which equals the external part of the marginal congestion costs), while the second-best discriminating leisure fare is lower than the first-best uniform fare. Second, the optimal airport charge implements the first-best uniform or second-best discriminating fares. Importantly, this charge can always be higher than what would be expected when all passengers were treated as having the same time valuation. This result provides some support to the finding that the welfare losses associated with an atomistic airport congestion charge may be low. © 2014 Elsevier Ltd.
Original languageEnglish
Pages (from-to)77-89
JournalTransportation Research. Part B: Methodological
Volume65
Issue numberJuly
DOIs
Publication statusPublished - 2014

Fingerprint

Airports
airport
pricing
Costs
Operating costs
Industry
operating costs
welfare
costs

Cite this

Czerny, A.I. ; Zhang, A. / Airport congestion pricing when airlines price discriminate. In: Transportation Research. Part B: Methodological. 2014 ; Vol. 65, No. July. pp. 77-89.
@article{a8d9c076f5f741a7a7c02a82bef8b705,
title = "Airport congestion pricing when airlines price discriminate",
abstract = "This paper extends the literature on airport congestion pricing by allowing carriers to price-discriminate between the business and leisure passengers when operating costs are the same for all passengers. The main results are: First, the second-best discriminating business fare exceeds the first-best uniform fare (which equals the external part of the marginal congestion costs), while the second-best discriminating leisure fare is lower than the first-best uniform fare. Second, the optimal airport charge implements the first-best uniform or second-best discriminating fares. Importantly, this charge can always be higher than what would be expected when all passengers were treated as having the same time valuation. This result provides some support to the finding that the welfare losses associated with an atomistic airport congestion charge may be low. {\circledC} 2014 Elsevier Ltd.",
author = "A.I. Czerny and A. Zhang",
year = "2014",
doi = "10.1016/j.trb.2014.04.004",
language = "English",
volume = "65",
pages = "77--89",
journal = "Transportation Research. Part B: Methodological",
issn = "0191-2615",
publisher = "Elsevier Limited",
number = "July",

}

Airport congestion pricing when airlines price discriminate. / Czerny, A.I.; Zhang, A.

In: Transportation Research. Part B: Methodological, Vol. 65, No. July, 2014, p. 77-89.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Airport congestion pricing when airlines price discriminate

AU - Czerny, A.I.

AU - Zhang, A.

PY - 2014

Y1 - 2014

N2 - This paper extends the literature on airport congestion pricing by allowing carriers to price-discriminate between the business and leisure passengers when operating costs are the same for all passengers. The main results are: First, the second-best discriminating business fare exceeds the first-best uniform fare (which equals the external part of the marginal congestion costs), while the second-best discriminating leisure fare is lower than the first-best uniform fare. Second, the optimal airport charge implements the first-best uniform or second-best discriminating fares. Importantly, this charge can always be higher than what would be expected when all passengers were treated as having the same time valuation. This result provides some support to the finding that the welfare losses associated with an atomistic airport congestion charge may be low. © 2014 Elsevier Ltd.

AB - This paper extends the literature on airport congestion pricing by allowing carriers to price-discriminate between the business and leisure passengers when operating costs are the same for all passengers. The main results are: First, the second-best discriminating business fare exceeds the first-best uniform fare (which equals the external part of the marginal congestion costs), while the second-best discriminating leisure fare is lower than the first-best uniform fare. Second, the optimal airport charge implements the first-best uniform or second-best discriminating fares. Importantly, this charge can always be higher than what would be expected when all passengers were treated as having the same time valuation. This result provides some support to the finding that the welfare losses associated with an atomistic airport congestion charge may be low. © 2014 Elsevier Ltd.

U2 - 10.1016/j.trb.2014.04.004

DO - 10.1016/j.trb.2014.04.004

M3 - Article

VL - 65

SP - 77

EP - 89

JO - Transportation Research. Part B: Methodological

JF - Transportation Research. Part B: Methodological

SN - 0191-2615

IS - July

ER -